[Congressional Record Volume 140, Number 2 (Wednesday, January 26, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: January 26, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
            CAPITAL FORMATION AND JOBS CREATION ACT OF 1994

                                 ______


                            HON. BILL ARCHER

                                of texas

                    in the house of representatives

                      Wednesday, January 26, 1994

  Mr. ARCHER. Mr. Speaker, today I am proud to introduce the Capital 
Formation and Jobs Creation Act of 1994. Speedy enactment of this bill 
will encourage investment in America, create jobs, reduce the cost of 
capital and lead to greater short-term and long-term economic growth.
  Compared to our major trading partners, Americans invest and save far 
too little. The Tax Code's poor treatment of savings and investment is 
a large reason why. We can best help American workers and businesses 
compete in the international marketplace by sweeping away these 
counter-productive tax disincentives. My bill does just that.
  It contains three important capital gains incentives: First, a 50-
percent capital gains deduction; second, indexation of the ``basis'' of 
capital assets to eliminate purely inflationary gains; and third, a 
provision to treat the loss on the sale of a home as a capital loss. 
The 50 percent capital gains deduction and the home sale capital loss 
provision would apply to sales after February 1, 1994. The capital 
gains indexation would apply to inflation--and sales of capital 
assets--occurring after December 31, 1994. All three of these 
provisions would make the tax code fairer by removing antitaxpayer, 
anti-investment provisions.
  The bill would substantially cut--at all income levels--the tax rate 
on capital gains by allowing taxpayers to deduct one-half of the amount 
of their net capital gains. Currently, capital gains are taxed at the 
same rate as ordinary income, subject to a tax rate cap of 28 percent. 
Thus, there is a modest capital gains differential for the upper tax 
rate brackets, but only because the 1993 Clinton tax plan raised income 
tax rates. All taxpayers need a capital gain break, and not just one 
created by raising income tax rates. Unlike the 1993 Clinton tax plan, 
the bill would provide a middle class tax cut by halving the capital 
gains tax rate for lower- and middle-income taxpayers. The new capital 
gains tax rates would be 7.5 percent, 14 percent, 15.5 percent, and 
19.8 percent for individuals. Corporations would be subject to a top 
capital gains tax rate of 17.5 percent.
  In addition, my bill would end the current practice of taxing 
individuals and corporations on gains due to inflation. Currently, 
taxpayers must pay capital gains taxes on the difference between an 
asset's sales price and its basis--the asset's original purchase price, 
adjusted for depreciation and other items--even though much if not all 
of that increase in value may be due to inflation. The bill would 
increase the basis of capital assets to account for inflation occurring 
after 1994. Taxpayers would be taxed only on the real--not 
inflationary--gain.
  Finally, the bill would correct a wrong in the Tax Code by treating 
the loss on the sale of a principal residence as a capital loss. 
Currently, if a homeowner has to sell his or her home at a loss, that 
loss is not deductible--even though future sales may be taxable.
  This is heads-the-government-wins-tails-the-taxpayer-loses. By 
treating the loss on the sale of a principal residence as a capital 
loss, the loss would be deductible--subject to the current capital loss 
deduction and carryover rules.
  America is undergoing a period of economic uncertainty. People are 
worried about their jobs and the economic prospects of future 
generations. The Capital Formation and Jobs Creation Act of 1994 sends 
a clear and unmistakable message that Congress is determined to 
dismantle barriers that are holding back the American economy.

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